SCHEDULES

Section 13

SCHEDULE 1 Chargeable gains accruing to non-residents etc

Part 1 5Extending cases in which non-residents are charged to tax etc

1 TCGA 1992 is amended as follows.

2 For the sections contained in Part 1 substitute—

““Part 1 Capital gains tax and corporation tax on chargeable gains

CHAPTER 1 10Capital gains tax

Charge to capital gains tax

1 Capital gains tax

(1) Capital gains tax is charged for a tax year on chargeable gains
accruing in the year to a person on the disposal of assets.

(2) 15As a result of section 4 of CTA 2009, capital gains tax is not charged
on gains accruing to a company, but corporation tax is chargeable
instead in accordance with—

(a) section 2 of CTA 2009,

(b) Chapter 2 of this Part, and

(c) 20other relevant provisions of the Corporation Tax Acts.

(3) Capital gains tax is charged on the total amount of chargeable gains
accruing to a person in a tax year after deducting—

(a) any allowable losses accruing to the person in the tax year,
and

(b) 25so far as not previously deducted under this subsection, any
allowable losses accruing to the person in any previous tax
year.

Territorial scope of charge

1A Territorial scope

(1) A person who is UK resident for a tax year is chargeable to capital
gains tax on chargeable gains accruing to the person in the tax year
5on the disposal of assets wherever situated.

(2) In the case of individuals who are UK resident for a tax year, see
also—

(a) Schedule 1 (foreign gains accruing to individuals to whom
the remittance basis applies),

(b) 10section 1G (cases where the tax year is a split year),

(c) sections 1M and 1N (temporary periods of non-residence),

(d) Chapter 3 (gains of non-UK resident close companies
attributed to individuals), and

(e) sections 86, 87, 87K, 87L and 89(2) (gains of non-UK resident
15trustees attributed to individuals).

(3) A person who is not UK resident for a tax year is chargeable to capital
gains tax on chargeable gains accruing to the person in the tax year
on the disposal of—

(a) assets situated in the United Kingdom that have a relevant
20connection to the person’s UK branch or agency and are
disposed of at a time when the person has that branch or
agency (see section 1B),

(b) assets not within paragraph (a) that are interests in UK land
(see section 1C), and

(c) 25assets (wherever situated) not within paragraph (a) or (b) that
derive at least 75% of their value from UK land where the
person has a substantial indirect interest in that land (see
section 1D and Schedule 1A).

(4) For the purposes of this Chapter a person is “UK resident” for a tax
30year if the person is resident in the United Kingdom during any part
of the tax year.

(5) For the relevant residence rules—

(a) in the case of individuals, see Schedule 45 to the Finance Act
2013 (which provides that individuals meeting the applicable
35tests for a tax year are taken to be resident for the whole of the
year),

(b) in the case of the personal representatives of deceased
individuals, see section 62(3), and

(c) in the case of trustees of settlements, see section 69.

1B 40Non-UK residents: UK branch or agency

(1) For the purposes of section 1A(3)(a) a person has a UK branch or
agency at any time if, at that time, the person carries on a trade,
profession or vocation in the United Kingdom through a branch or
agency there.

(2) 45For the purposes of section 1A(3)(a) an asset has a relevant
connection to a person’s UK branch or agency if—

(a) it is, or was, used in or for the purposes of the trade,
profession or vocation at or before the time of the disposal,

(b) it is, or was, used or held for the purposes of the branch or
agency at or before that time, or

(c) 5it is acquired for use by or for the purposes of the branch or
agency.

(3) Section 1A(3)(a) does not apply to a person who, as a result of Part 2
of TIOPA 2010 (double taxation arrangements), is exempt from
income tax for the tax year in respect of the profits or gains of the
10branch or agency.

(4) In the case of a profession or vocation carried on by a person, an asset
does not have a relevant connection to the person’s UK branch or
agency if—

(a) the asset was only used in or for the purposes of the
15profession or vocation before 14 March 1989, or

(b) the asset was only used or held for the purposes of the branch
or agency before that date.

(5) In this Act, unless the context otherwise requires, “branch or
agency”—

(a) 20means any factorship, agency, receivership, branch or
management, but

(b) does not include any person within any of the exemptions
under sections 835G to 835K of ITA 2007 (persons who are
not UK representatives).

1C 25Non-UK residents: disposing of an “interest in UK land”

(1) For the purposes of section 1A(3)(b) an “interest in UK land”
means—

(a) an estate, interest, right or power in or over land in the United
Kingdom, or

(b) 30the benefit of an obligation, restriction or condition affecting
the value of an estate, interest, right or power in or over land
in the United Kingdom,

other than an excluded interest.

(2) The following interests are “excluded interests”—

(a) 35any interest or right held for securing the payment of money
or the performance of any other obligation,

(b) a licence to use or occupy land,

(c) in England and Wales or Northern Ireland, a tenancy at will
or an advowson, franchise or manor, and

(d) 40such other descriptions of interest or right in relation to land
in the United Kingdom as may be specified in regulations
made by the Treasury.

(3) An interest or right is not within subsection (2)(a) if it is—

(a) a rentcharge, or

(b) 45in Scotland, a feu duty or a payment mentioned in section
56(1) of the Abolition of Feudal Tenure etc (Scotland) Act
2000.

(4) The grant of an option by a person binding the person to dispose of
an interest in UK land is (so far as it would not otherwise be the case)
regarded as a disposal of an interest in UK land by the person for the
purposes of section 1A(3)(b).

(5) 5This does not affect the operation of section 144 in relation to the
grant of the option (or otherwise).

(6) In this section—

• “franchise” means a grant from the Crown such as the right to
  hold a market or fair, or the right to take tolls, and

• 10“land” includes—

  (a)

  buildings and structures, and

  (b)

  land under the sea or otherwise covered by water.

1D Non-UK residents: assets deriving 75% of value from UK land etc

(1) For the purposes of section 1A(3)(c) the following questions are
15determined in accordance with the provision made by Schedule
1A—

(a) whether the asset being disposed of derives at least 75% of its
value from UK land, and

(b) whether the person making the disposal has a substantial
20indirect interest in the UK land at the time of the disposal.

(2) The provision made by Schedule 1A is not to be taken as affecting the
meaning of “substantial” in other contexts.

Deduction of allowable losses

1E Losses deductible only when within scope of tax etc

(1) 25A loss is not an allowable loss if it accrues in a tax year at a time
when, had a gain accrued instead, the gain would not have been
chargeable to capital gains tax under this Act for the tax year (and see
also sections 16(2) and 16A).

(2) In addition, the only allowable losses that qualify for deduction from
30chargeable gains under section 1A(3) (non-UK residents) are those
accruing to the person on disposals of assets within that subsection.

(3) An allowable loss counts for the purposes of subsection (2) even if it
accrues in a tax year in which the person was UK resident.

(4) No allowable losses may be deducted from chargeable gains treated
35as accruing to an individual as a result of section 87, 87K, 87L or 89(2)
(read, where appropriate, with section 1M).

(5) If—

(a) amounts (or elements of amounts) treated as accruing to an
individual as a result of section 86 relate to different
40settlements, and

(b) the deduction of allowable losses does not reduce the
amounts or elements to nil,

the deduction applicable to each amount is the proportion that the
amount concerned bears to the total of the amounts.

(6) The deduction of allowable losses also has effect subject to Schedule
1 (UK resident individuals not domiciled in UK).

(7) For the only case in which an allowable loss accruing in a tax year
may be carried back to an earlier tax year, see section 62 (death).

1F 5Allowable losses to be used in most beneficial way etc

(1) Allowable losses may (subject to express provision to the contrary)
be deducted from gains in whichever way is most beneficial to a
person chargeable to capital gains tax.

(2) Accordingly, an allowable loss may be deducted from a chargeable
10gain irrespective of the rate of tax at which the gain would otherwise
have been charged.

(3) Allowable losses that are deducted from gains may not be deducted
any further than is necessary to eliminate the gains.

(4) No part of an allowable loss may be relieved under this Act more
15than once.

(5) So far as an amount has been relieved under the Income Tax Acts, it
may not be further relieved under this Act.

UK resident individuals with split tax years

1G Gains accruing to UK resident individuals in split years

(1) 20If, as respects any individual, a tax year is a split year, sections 1A(1)
and 1E have effect subject to the modifications made by this section.

(2) Gains accruing to the individual in the overseas part of the tax year
are chargeable to capital gains tax only if they accrue on the disposal
of assets within section 1A(3).

(3) 25Losses are deductible from gains accruing to the individual in the
overseas part of the tax year on the disposal of assets within section
1A(3)(b) or (c) only if the losses accrue to the individual on the
disposal of—

(a) assets that are within section 1A(3)(b) or (c), or

(b) 30assets that would be within section 1A(3)(b) or (c) if they did
not have a relevant connection to the individual’s UK branch
or agency.

(4) But losses accruing in the overseas part of the tax year on disposals
of assets within section 1A(3)(b) or (c) are (so far as not deducted as
35mentioned in subsection (3)) deductible from gains accruing in the
UK part of the tax year.

Rates of CGT

1H The main rates of CGT

(1) This section makes provision about the rates at which capital gains
40tax is charged but has effect subject to—

(a) section 169N (entrepreneurs’ relief: rate of 10%), and

(b) section 169VC (investors’ relief: rate of 10%).

(2) Chargeable gains accruing in a tax year to an individual that are—

(a) residential property gains (see Schedule 1B), or

(b) carried interest gains (see subsections (9) to (11)),

are charged to capital gains tax at a rate of 18% or 28%.

(3) 5Other chargeable gains accruing in a tax year to an individual are
charged to capital gains tax at a rate of 10% or 20%.

(4) The question as to which of the rates applies to the gains concerned
is determined by section 1I (income taxed at higher rates or gains
exceeding unused basic rate band).

(5) 10Chargeable gains accruing in a tax year to the personal
representatives of a deceased individual that are—

(a) residential property gains, or

(b) carried interest gains,

are charged to capital gains tax at a rate of 28%.

(6) 15Other chargeable gains accruing in a tax year to the personal
representatives of a deceased individual are charged to capital gains
tax at a rate of 20%.

(7) Residential property gains accruing in a tax year to the trustees of a
settlement are charged to capital gains tax at a rate of 28%.

(8) 20Other chargeable gains accruing in a tax year to the trustees of a
settlement are charged to capital gains tax at a rate of 20%.

(9) For the purposes of this section chargeable gains are “carried interest
gains” if they accrue to an individual (“X”)—

(a) under section 103KA(2) or (3) (investment management
25services), or

(b) as a result of carried interest arising to X under arrangements
not involving a partnership under which X performs
investment management services directly or indirectly in
respect of an investment scheme.

(10) 30A gain is not a carried interest gain under subsection (9)(b) if the
carried interest constitutes a co-investment repayment or return.

(11) Expressions used in subsection (9) or (10) have the same meaning as
they have in Chapter 5 of Part 3.

1I Income taxed at higher rates or gains exceeding unused basic rate band

(1) 35If any of an individual’s income for a tax year is chargeable to income
tax at a higher income tax rate, gains accruing to the individual in the
tax year are charged—

(a) at the rate of 28%(if they are residential property gains or
carried interest gains), or

(b) 40at the rate of 20% (if they are other kinds of gains).

(2) If—

(a) none of an individual’s income for a tax year is chargeable to
income tax at a higher income tax rate, but

(b) the individual is chargeable to capital gains tax for the tax
year on an amount that exceeds the unused part of the
individual’s basic rate band,

the excess (“the higher rate excess”) is charged at the rate of 28%(so
5far as comprising residential property gains or carried interest gains)
or at the rate of 20% (so far as comprising other kinds of gains).

(3) The remainder of this section sets out special rules which apply
depending on the nature of the gains within subsection (2)(b).

(4) If—

(a) 10the gains consist of or include gains (“entrepreneur or
investor gains”) chargeable at the rate of 10% under section
169N(3) or 169VC(2), and

(b) the total amount of the entrepreneur or investor gains
exceeds the unused part of the individual’s basic rate band,

15that unused part is used fully against those gains.

(5) The effect of so doing is that other gains comprised in the higher rate
excess are then charged—

(a) at the rate of 28%(if they are residential property gains or
carried interest gains), or

(b) 20at the rate of 20% (if they are other kinds of gains).

(6) If the total amount of the entrepreneur or investor gains does not
exceed the unused part of the individual’s basic rate band—

(a) so much of that unused part as is equal to that total amount
is used against those gains, and

(b) 25accordingly, the higher rate excess consists only of gains
other than entrepreneur or investor gains.

(7) The individual may allocate so much of the unused part of the
individual’s basic rate band as then remains to—

(a) any residential property gains or carried interest gains, or

(b) 30any other gains.

(8) The effect of the allocation is that the gains to which the allocation is
made are charged—

(a) at the rate of 18%(if they are residential property gains or
carried interest gains), or

(b) 35at the rate of 10% (if they are other kinds of gains).

(9) Any gains to which no allocation is made are charged—

(a) at the rate of 28%(if they are residential property gains or
carried interest gains), or

(b) at the rate of 20% (if they are other kinds of gains).

1J 40Section 1I: definitions and other supplementary provision

(1) For the purposes of section 1I—

• a “higher income tax rate” means—

  (a)

  the higher rate or the default higher rate,

  (b)

  the savings higher rate, or

  (c)

  45the dividend upper rate, and

Finance (No. 3) BillPage 77

• “the unused part of the individual’s basic rate band” means the
  amount by which the basic rate limit exceeds the individual’s
  Step 3 income.

(2) If an individual is entitled to relief for a tax year under section 539 of
5ITTOIA 2005 (contracts for life insurance) by reference to the amount
of a deficiency, the individual’s Step 3 income for the tax year is
treated for the purposes of this section as reduced by the amount of
the deficiency.

(3) If, as a result of section 669(1) and (2) of ITTOIA 2005 (inheritance tax
10on accrued income), there is a reduction in the residuary income of
an estate for a tax year that reduces an individual’s income by any
amount, the individual’s Step 3 income for the tax year is treated for
the purposes of this section as reduced by the amount of that
reduction in the individual’s income.

(4) 15If an individual has life insurance gains for a tax year, the
individual’s Step 3 income for the tax year is treated for the purposes
of this section as if the amount of those gains were limited to—

(a) the annual equivalent within the meaning of section 536(1) of
ITTOIA 2005, or

(b) 20the total annual equivalent within the meaning of section 537
of that Act,

as the case may be.

(5) If—

(a) an individual has life insurance gains for a tax year,

(b) 25relief is given under section 535 of ITTOIA 2005 for the tax
year, and

(c) the calculation under section 536(1) or 537 of that Act for the
tax year does not involve the higher rate,

the individual is treated for the purposes of section 1I as if none of
30the individual’s income were chargeable to income tax at the higher
rate, the default higher rate or the dividend upper rate.

(6) In the application of section 1I in the case of any individual it is to be
assumed that the individual is not a Scottish or Welsh taxpayer.

(7) In this section—

• 35“the individual’s Step 3 income” means so much of the
  individual’s total income for the tax year as is left after taking
  Step 3 under section 23 of ITA 2007 (income tax liability
  calculation), and

• “life insurance gains”, in relation to an individual, means the
  40amount or amounts treated as the individual’s income as a
  result of section 465 of ITTOIA 2005 (gains from contracts for
  life insurance).

(8) Expressions used in this section which have a meaning when used in
the Income Tax Acts have the same meaning in this section.

Annual exempt amount

1K Annual exempt amount

(1) If an individual is (or, apart from this section, would be) chargeable
to capital gains tax for a tax year on chargeable gains, the annual
5exempt amount for the year is to be deducted from those gains (but
no further than necessary to eliminate them).

(2) The annual exempt amount for a tax year is £12,000.

(3) The annual exempt amount may not be deducted from chargeable
gains to which paragraph 2 of Schedule 1 applies (foreign gains of
10non-UK domiciled individuals accruing in one year and remitted in
later year).

(4) The deduction of the annual exempt amount—

(a) is made after the deduction of allowable losses accruing in
the tax year, but

(b) 15is made before the deduction of allowable losses accruing in
a previous tax year or, if section 62 applies, in a subsequent
tax year.

(5) The annual exempt amount may be deducted from gains in whatever
way is most beneficial to a person chargeable to capital gains tax
20(irrespective of the rate of tax at which the gains would otherwise
have been charged).

(6) An individual is not entitled to an annual exempt amount for a tax
year if section 809B of ITA 2007 (claim for remittance basis) applies
to the individual for the year.

(7) 25For the tax year in which an individual dies and for the next two tax
years, this section applies to the individual’s personal
representatives as if references to the individual were to those
personal representatives.

(8) This section applies in relation to trustees in accordance with the
30provision made by Schedule 1C.

1L Increasing annual exempt amount to reflect increases in CPI

(1) If the consumer prices index for the September before the start of a
tax year is higher than it was for the previous September—

(a) the annual exempt amount is increased by the same
35percentage as the rise in that index (rounded up to the nearest
£100), and

(b) section 1K(2) has effect for the tax year (and subsequent tax
years) as if it referred to the increased amount.

(2) If, as a result of this section, the annual exempt amount for a tax year
40increases, the Treasury must before the start of the tax year make an
order showing the increased amount.

Temporary periods of non-residence

1M Temporary non-residents

(1) If, in the case of the disposal of an asset by an individual who is
temporarily non-resident—

(a) 5a gain or loss accrues to the individual in the temporary
period of non-residence, and

(b) the asset is not excluded from this subsection by section 1N
(certain assets acquired in that period),

the gain or loss is treated instead as accruing to the individual in the
10period of return.

(2) If—

(a) a gain is, as a result of subsection (1), treated as accruing to an
individual in a tax year for which the remittance basis applies
to the individual,

(b) 15the tax year consists of or includes the period of return, and

(c) the gain was remitted to the United Kingdom in the
temporary period of non-residence,

the gain is treated instead as remitted to the United Kingdom in the
period of return.

(3) 20If—

(a) an individual is temporarily non-resident, and

(b) a gain would, as a result of section 86, have accrued to the
individual in a tax year falling wholly or partly in the
temporary period of non-residence if the individual had been
25resident in the United Kingdom for that year,

the gain is treated instead as accruing to the individual in the period
of return (but see also section 86A).

(4) Nothing in any double taxation arrangements prevents a charge to
capital gains tax arising as a result of this section.

(5) 30Nothing in this section is to affect a gain or loss which, apart from
this section, would be chargeable to capital gains tax or would be an
allowable loss.

(6) For the purposes of this section each of the following expressions has
the meaning given by Part 4 of Schedule 45 to the Finance Act 2013
35(statutory residence test: anti-avoidance)—

• “the period of return”

• “temporarily non-resident”

• “the temporary period of non-residence”.

(7) In this section the reference to “the remittance basis” applying to an
40individual for a tax year is to section 809B, 809D or 809E of ITA 2007
applying to the individual for the year.

1N Section 1M(1): assets acquired in temporary period of non-residence

(1) An asset is excluded from section 1M(1) if—

(a) it was acquired by the individual in the temporary period of
45non-residence,